IANAL, so this is all guesswork, but I sort of have some (continuing as of this semester) background in Internet law issues...

Jurisdiction over Internet matters is really tricky, but its nature makes the site accessible to those in the USA. Just like US firms were required to comply with French and German law concerning the sale of Nazi memorabilia over Yahoo! auctions (which is illegal in those two countries), he can probably be held liable for this.

Even if he were just passively making information available for consumption in the USA, that would probably be sufficient for a jurisidiction claim. But considering he seems to be selling his services to those in the USA, then he would almost definitely be held under US law, as that would probably constitute "contacts" in the state.

Companies have to ruthlessly guard their names and anything even close to it so that it doesn't become diluted. It's why a company like Disney sued a daycare center for painting images of Disney characters on the walls without permission. They have to protect their interests, or it sets future precedents.

So IMO Microsoft could take this to court, but they'd have a decently tough time proving that this name would hurt their business. They would have to reasonably quantify that attaching "soft" to a name is indicative of their brand, and that this kid is intentionally trying to deceive people and that actual customers would be confused.

OTOH he's obviously using a recognizable name to his advantage, and this most definitely wouldn't be "fair use" for satire purposes if he's seeking to make a business with it.

Internet law is obviously still evolving, and these are the kinds of things I have to pay attention to. I'll ask my e-Commerce law professor about this situation sometime this week...at least he's qualified to make his predictions, I'm totally guessing